Bankrupt apparel chain Steve & Barry’s yesterday said it has agreed to be bought for $163 million by Bay Harbour Management, a New York hedge fund that aims to save it from liquidation.

The news confirms a Saturday story in The Post, which reported a fresh bid from a hedge fund with a track record of turning around distressed retail companies.

Bay Harbour’s past investments have included the Barneys luxury chain, which it sold in 2004 to Jones Apparel for $400 million after scooping it out of bankruptcy in 1999.

Sources said Bay Harbour also has been in talks to partner with an overseas investor as it looks to turn around Steve & Barry’s. The Port Washington, LI-based chain filed for Chapter 11 last month as an unusual growth strategy that relied upon payments from landlords hit a wall amid the credit crunch.

However, it’s not clear how many of the 276 Steve & Barry’s stores Bay Harbour will continue to operate. The purchase agreement stipulates rent reductions of as much as 25 percent, sources said, and it’s not clear how many landlords will agree.

Meanwhile, Bay Harbour’s bid continues to face opposition from creditors who stand to gain more from a liquidation, sources said. Those include Prentice Capital Management, which is looking to collect on a $30 million term loan secured against Steve & Barry’s inventory, sources said.